March 2008 ~ Credit And Debt Management

Monday, March 31, 2008

Credit Card Consolidation FAQ

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For individuals who carry a balance on several credit cards, debt consolidation, with the necessity to make only one monthly payment, offers an attractive opportunity. Using this approach, debtors can lower interest rates or the overall size of required minimum payments.

Jim Tehan, spokesman for money management website Myvesta Foundation, recommends that most people should carry no more than two credit cards while trying to control debt. The more cards people carry, the more opportunities they have to get deeper into credit card debt.

Tehan asserts that if people think they might be having money problems, they probably are. For anyone having trouble making the minimum payments on credit cards, consolidation presents some relief.

In addition to lowering overall monthly credit card payments, consolidation can relieve some of the emotional stress that comes with credit card debt. By receiving fewer credit card bills and sending back fewer payments, people simplify their financial lives, which can provide peace of mind.

How to Get a Second Job to Pay Debt

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Being in debt is never an enjoyable experience and it can have a negative impact on your emotional well-being. Even if you have a high-paying, full-time job, you may not be making enough money to pay your current bills while attempting to pay off your existing debt. Picking up a second job can increase your income and help you get out of debt faster. While working two jobs is extremely time-consuming, it is often one of the easiest and fastest ways to get yourself out of debt and your life back on track.

Instructions

Talk to your current employer to verify that your schedule is secure and that you will be working the same hours and days until further notice. Knowing that you have a stable work schedule at your first job will allow you to figure out what times you can work at a second job.

Apply for jobs at places that have hours of operation and shifts that coincide with the time you have open for working a second job. Turn in a resume with each application highlighting your skills, experience and qualifications. Some ideas for second jobs you may consider getting include delivering food, waiting tables, bartending, retail or tutoring.

Work the schedule at your second job around the schedule at your first job. Make sure that your new employer is aware that you do have another job that may conflict with scheduling you for certain days or times throughout the week. While you may need the money from your second job to pay off your debt, it is important that the schedule does not cause you to jeopardize your position at your first job.

Spend all of the money from your second job toward paying off your debt. While it may be exciting having extra money each month, it is essential that you do not lose sight of why you chose to get a second job in the first place. Spending the money made at your second job toward expenses that are not related to your debt can cause you to go even further into debt.

Save a portion of your income from your second job as you get closer to having all of your debt paid off or have paid it off in full. Saving this money will allow you to build a security net that will prevent you from falling behind and finding yourself in debt once again.

Quit your second job once you feel that you are completely caught up financially and no longer need to carry the burden of working two jobs.

How to Calculate a Payoff Date After Additional Principal Payments

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After you have made additional principal payments, you can calculate the amount needed to payoff the account if you have all of the terms. The payoff will be lower after additional principal payments have been made, because the balance will be less. The smaller the balance, the less interest or finance charges that accrue daily. You can calculate the payoff using the same technique for a mortgage loan, auto loan or even credit cards.

Instructions

Review all of the terms and conditions regarding your loan. You'll specifically need the loan balance, interest rate and the date the additional principal payment was made. Once you have all of these facts, you can easily compute a payoff balance for your credit account. The payoff figure can change frequently, since interest accrues daily.

Decide which type of account you want to make additional principal payments on. If you send in additional principal payments on a credit card account, the interest due will be taken from the additional principal payment. When additional principal payments are sent in for auto or mortgage loans, you can request the entire amount be deducted from the principal balance without anything going to interest.

Determine what day you want the loan paid off. If you have a loan balance of $5,000 with an interest rate of 6 percent, the payoff can be computed. Interest starts accruing daily from the date the additional principal payment was made. If your last additional principal payment was made on January 15, for example, interest accrues from this point on. Any interest accruing before this point will have been deducted from the last principal payment. If you decide to pay off your loan on January 30, you will need to find out the amount of interest that accrues from January 15 to January 30, or 15 days.

Calculate the interest due. Take the interest rate of 6 percent and divide it by 360, times 15 days, times the balance of $5,000. In this example, the interest that accrues for 15 days is $12.49. Add the accumulated interest to the balance of $5,000 to get the payoff figure, which is $5,012.49. This is the amount needed to payoff the balance after an additional principal payment has been made.

Determine a new payoff date. The payoff figure should arrive by January 30 to be considered a valid payoff. If your payoff will not arrive on time, you will need to pay additional interest. To calculate the new payoff date, a per diem figure is needed. Since the amount of interest for 15 days is $12.49, the amount of interest for one day is 83 cents ($12.49/15 = .8326). If you need an additional five days to get your payoff to its desired destination, you should add $4.16 to the old payoff figure (.8326 x 5 = $4.163). The new payoff figure will be $5,016.65 ($5,012.49 + $4.163).

Review the process. If you have a balance of $10,000 with an interest rate of 7 percent and you last paid on the account on January 1, you can use this information to calculate a payoff after an additional principal payment is made. Suppose you send in an additional principal payment of $500, which is received on January 20. There are 19 days of interest that must come from the payment, which adds up to $36.93. Now, subtract the interest of $36.93 from $500 and you get $463.06, which is the amount your balance is reduced by. The new balance is $9,536.94. Calculate a payoff date from January 20 to the payoff date you would like using the same equation above with a new balance of $9,536.93.

Debt and the Effects of Stress

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If you're carrying too much debt for your comfort, you may find yourself worrying about your ability to repay it. If you're being harassed by bill collectors or even facing the possibility of bankruptcy or foreclosure, you may be dealing with an extreme amount of stress. Debt stress can affect your life in several ways.

Worrying about debt could lead to problems with your physical health. According to MSNBC.com, a 2008 poll conducted by Associated Press-AOL Health, responders who worried about heavy debt reported they suffered from more physical ailments than people indicating low debt stress. For instance, 27 percent of those with high debt stress said they suffered from ulcers or digestive tract problems, compared with only 8 percent of those with low levels of debt stress. Six percent of people worried about high debt had suffered heart attacks, double the figure of those with low debt stress.

The AP-AOL Health Poll also indicated that debt stress can lead to mental health issues. According to the poll, 23 percent of debt worriers reported they suffered from depression, compared with only 4 percent of those with little debt stress. High anxiety was also an issue, as 29 percent of those stressing over high debt said they suffered from this condition, compared with only 4 percent of those not worried about debt.

Debt-related stress can also negatively affect how you behave as well as your daily activities, according to MSNBC.com. In particular, you may be more irritable, which affects how you interact with work colleagues, friends and family members. You may have more difficulty sleeping, limiting your ability to function effectively. The inability to concentrate due to debt worries can also impact all areas of your life and could even be dangerous in situations where attention to safety is paramount, such as when operating a vehicle or machinery.

According to Kelly McGonigal, a Stanford University psychologist and researcher, an effective way to deal with debt stress is to identify and confront it. Instead of just glancing at bills, make a list of the exact amount that you owe for each of your debts. The next step is to set up a plan to repay them. If necessary, seek the help of a professional such as a nonprofit credit counselor. Even if it takes longer to pay off your debts than you'd like, you'll gain relief from knowing that you're taking positive steps to resolve the issue.

How to Clear Your Credit Report of Judgments

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A poor credit score will negatively affect your life. It will affect the loans you are offered in the future, the type of apartment you can rent and it can even impede your ability to secure employment. One of the factors that will negatively affect your credit score is the presence of judgments. Judgments, or court-ordered liens against you, can be removed from a credit report.

Instructions

Pull an updated copy of your credit report. Visit Annual Credit Report, the official, federally mandated credit report site. Pay for a copy of your FICO score, too. This three-digit number between 300 and 850 represents your creditworthiness. Scores below 600 are poor; scores above 720 are excellent.

Confirm the judgments on your report. These will be listed in the "Public Records" section of your report, apart from the list of open and closed trade lines. Find out if these judgments are unpaid. Unpaid judgments will reflect an outstanding balance on your report. Credit bureaus can, and often will, report paid judgments, too.

Contact the owners of all unpaid judgments. These are often collection companies. Obtain a payoff balance complete with a good-through date, back interest, a per diem (a daily charge past the good-through date) and a full outstanding balance.

Pay the judgments as agreed. Make sure to collect a paid in full letter from the credit company or collection agency.

Draft a goodwill letter. See Resource 2 for a sample letter. This letter is a plea to remove the paid judgments from your credit report. You must make a compelling case. Often credit bureaus will look favorably at a request if the judgment stemmed from a medical emergency--like an accident or serious illness.

Include all documents that support your argument with the goodwill letter. Make sure these are copies, not originals. These documents can include: medical bills, disability award letters and letters from physicians. Send this package to all three credit bureaus. See Resource 3 for the addresses.

Confirm that the judgments are gone, if approved, by pulling a new copy of your credit report. The credit bureaus have 30 days to respond to your inquiry, and an additional 90 days to either honor or reject the request.

What Is Differential Claim Insurance?

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A claim is the basic action taken by an insurance policy holder who wants to claim insurance benefits for health treatment, lost employment or any other type of expense covered by the insurance policy. When these claims must be adjusted based on an individual's earnings, or when a claim runs afoul of policy rules, claim differentials must be worked out. Differential claims on insurance are most often used for wage decreases due to disability and treatment from non-covered physicians.

A wage differential claim is filed by a worker or on a worker's behalf to protect a his interest if he has lost wages because of disability. In many states, workers receiving disability must submit to regular doctor visits to determine if the they are still physical disabled. Sometimes, the doctor clears a disabled worker to work, but not in the field of prior employment, as is sometimes the case with construction or some engineering fields. Filing a wage differential claim makes you eligible for state aid to supplement a loss in wages as well as free career training to help with workforce reentry.

Eligibility requirements for workers filing a wage differential claim on their disability insurance vary from state to state. In Illinois, for example, a worker must prove a permanent physical impairment preventing her from returning to her previous line of work as well as demonstrate a reduction in wages because of the impairment. The wage differential awarded is designed to make up for wages lost and, in Illinois, is paid on a tax-free basis for the duration of the worker's life. In any state, a worker will have to submit to a court hearing as part of the wage differential claim filing process.

Employers and businesses in America are required by state and federal law to obtain a number of different types of business insurance, including disability and unemployment. When employee claims on a company's insurance policies exceed the policy's premium, some states require employers to pay a premium differential to make up for this difference. For instance, the New York State Insurance Fund -- the agency in charge of state disability insurance -- charges a premium differential to employers whose disability claims exceed their annual premium level. As of January 2010, the NYSIF disability premiums were $0.14 per employee for each $100 earned in payroll.

Claim differentials are an important issue when receiving treatment covered by your health insurance from a provider that isn't covered by your policy, also known as a nonparticipating provider. Some health insurance policies have claim differentials in place specifically for policy holders who wish to receive treatment from doctors and physicians outside of their policy. Some insurance providers, such as Blue Cross Blue Shield (BCBS), will process a differential claim for covered procedures performed by a nonparticipating provider that is less than the allowable claim for participating providers, which is 10 percent less for BCBS claims.

What Income Is Exempt in Texas From Unsecured Debt?

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If you fell behind on your payments of unsecured debt, such as credit cards, and your creditor has sued you and won, you now have a judgment against you, which gives your creditor more avenues to collect the debt you owe. In many states, creditors can freeze your bank accounts, seize your property and garnish your wages. In Texas, creditors have fewer options available to them for collection, and some income is exempted by federal law.

In Texas, as in all other states, a creditor must first sue you in court to prove that you owe the debt before he can take further action to collect it. Once he is awarded a judgment against you, he can further pursue you in court to collect that judgment from any assets you have, such as property, bank accounts or financial instruments like stocks and bonds. Texas, unlike most states, will not allow a creditor to garnish your wages for unsecured debt.

In accordance with federal law, certain income cannot be garnished or seized from a bank account in Texas, or any other state. Exempted by law from bank seizures are Railroad Retirement benefits, Social Security benefits, military pensions and survivor's benefits, civil service and federal retirement pensions, VA benefits, Supplemental Security Income, student aid, Merchant Seaman's Wages, Longshoreman's and Harbor Workers' Death and Disability benefits, FEMA disaster relief and compensation for employees of U.S. contractors overseas for death, disability or detention.

If you lose the court case, the court cannot compel you to pay the judgment if you don't have the money and it cannot send you to jail for non-payment. However, the creditor does have a right to serve you with a discovery of assets form, which you must complete or face a contempt of court order, for which you can be jailed. A discovery of assets form requires that you list your assets in response to questions posed by the creditor. Depending on the assets, the creditor can then request that a judge order you to turn them over to the creditor to satisfy your debt. In Texas, your creditor cannot take your car, home or your household goods.

There are certain exceptions to the federal income exemptions. If you owe back child support, back federal taxes or student loans, your federal benefits may have payments deducted before you receive your check to ensure these debts are paid. The federal government does not have to go to court to do this. You can appeal their decision.

What Wages May Be Garnished?

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When you get into debt, one of the potential consequences of not making payments on the debt is wage garnishment. This is a process by which a creditor takes part of your paycheck every time you get paid. In regard to wage garnishment, the creditor can only take money from specific sources.

When you owe a creditor a debt and do not pay off the balance, the creditor may file a lawsuit against you. After the lawsuit is filed, the creditor can get a judgment against you from the court. Once a judgment is received, the creditor can work with the local sheriff's office to set up a wage garnishment. At that point, a portion of your paycheck from your employer is deducted and given directly to the creditor.

When a creditor sets up a wage garnishment on your paycheck, it cannot simply take your entire paycheck. The creditor can only take a percentage of the amount that you earn from your job. The federal government has set a maximum of 25 percent of your disposable earnings that can be taken through garnishment. Each state has laws in regard to how much can be taken out of your paycheck. Some states do not allow garnishment or have very low percentages, while many others simply go with the 25 percent rule of the federal government.

If you receive some kind of financial government benefits, the creditor typically cannot garnish any of them as they are received. For example, if you get Social Security benefits, disability benefits or veterans benefits, a creditor cannot garnish this money. If you receive civil service or federal retirement benefits, you can also exempt them from wage garnishment. Student assistance and railroad retirement benefits are also not eligible for garnishment when you have a judgment against you.

Even though, as a general rule, military and government benefits cannot be garnished for a debt, some exceptions exist. For instance, if you have a judgment against you from child support or spousal support after a divorce, these benefits can be garnished. With these types of debt, the court can also take a larger percentage out of your benefits when compared with what regular creditors can take through a wage garnishment. If you go through a divorce, you must make the required payments if you want to avoid garnishment.

Does Having Federal Student Loans on Your Credit Hurt It?

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Federal student loans can help your credit rating if you make on-time payments, the same as any other installment or revolving loan. However, defaulting or making delinquent payments on federal student loans can negatively impact your credit score for longer than other loans. Under certain circumstances, federal student loans can hurt your credit for life.

Making timely payments on your federal student loans will positively impact your credit rating. The largest single factor that affects a consumer's overall credit rating is payment history. Payment history is 35 percent of the credit rating calculation. Paying student loans on time each month demonstrates that you are a financially responsible consumer. Federal student loans also report to all three credit bureaus, which builds credit history. Credit history accounts for 15 percent of the overall credit score. Having federal student loans on your credit can impact the overall score by 50 percent.

Outstanding balances on federal student loans can hurt your debt-to-income ratio. Lenders evaluate your creditworthiness primarily based on your credit rating and your debt-to-income ratio. To calculate your debt-to-income ratio, divide the total recurring debt obligation per month by your total gross monthly income. If the ratio is higher than .36, it may prove more difficult to qualify for a loan. Lower debt-to-income ratios can also translate into better interest rates for the credit you need.

Federal student loans can hurt your credit rating if you are delinquent in paying the monthly amount due. The same way that on-time payments boost your payment history, delinquent payments negatively impact the overall calculation. With 35 percent of your credit score on the line, delinquent payments can significantly reduce your score. Delinquent payments for many loans fall off of your credit score after seven years, in accordance with the Fair Credit Reporting Act. Student loan delinquencies can remain on your report for seven years after the loan is repaid. Potential lenders will likely request that you explain any delinquent payments for student and other loans as part of future loan evaluations.

Defaulting on federal student loans have more stringent consequences than defaulting on other revolving or installment loans, such as credit cards. The FCRA allows certain delinquencies, defaults and collection accounts to be removed from your credit rating after seven years, no matter if the loan is repaid in full or not. Federal student loans can only be removed from your credit report seven years after they are paid in full. This means that defaulted federal student loans will follow you for life if you never repay them.

Government Grants for Debt Consolidation

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As of April 2011, there are no state or federal government grants available for consumers who wish to consolidate or eliminate their personal loans, such as credit cards. While it's true that local, state, and federal governments often award considerable sums to organizations and individuals -- often, money that doesn't have to be repaid -- the money must be used for a specific purpose, and applicants must meet certain criteria.

Government grants exist for a variety of purposes, each specific to its own grant. The website Grants.gov was developed to streamline the grants approval process, and individuals and groups may apply to receive any grant for which they believe themselves eligible. For example, if you are anxious to conduct medical or environmental research, there may be a grant for you.

Competition to receive a grant -- money that doesn't have to be repaid -- is stiff. Applying is always free -- one way to know if the grants application you're using is legitimate. You should never need to provide your bank account or credit card information, and if you're paying for "government grant assistance," know that you can research grants by yourself for free, quite easily, at Grants.gov.

If you're a homeowner, the government provides help through the Making Home Affordable program. You may qualify for a "streamline refinance" or a mortgage modification, but you must apply through your lender. If you're looking to buy a home, you may qualify for an FHA program that permits small down payments and has easier qualification rules.

Remember that the government won't reach out to you and offer to solve your debt problem; if you are contacted, report the incident to your state attorney general's office and the Better Business Bureau. Fake grants agencies are semi-legitimate scams at best, and felons at worst.

When you provide personal information to a company that claims to assist, provide or administer government grants, you are opening yourself up to the chance that your identity will be stolen. An identity thief may use your address, bank account, credit card or social security number to establish false accounts in your name and then accumulate thousands of dollars in debts. The debts won't be repaid, and your credit history and score will suffer tremendously.

Review your free credit reports at AnnualCreditReport.com and report suspicious activity immediately. Make sure to indicate that you suspect you've been the victim of identity theft.

If you need to consolidate your debts but aren't sure what to do, you have options; if you have home equity, one popular way is to take out a home equity loan. Your debts will be consolidated, most likely at a very low interest rate; however, you have secured loans with your home. If you default, you could lose your residence.

You can also try the "debt avalanche," where you concentrate on paying one high-interest loan first while paying the minimums on the others. When it's paid, apply the payment to another high-interest loan. Because you're consistently increasing your payments on your debts, the loans are repaid more quickly.

Finally, consider calling the National Foundation for Credit Counseling. After a free consultation, you may be eligible to enroll in a debt management program.

There aren't any easy answers for a consumer with a debt problem, but there are solutions. Don't give up.

Can My Social Security Disability Be Garnished by Medicare?

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When a person falls into debt with a creditor, the creditor may choose to take legal action against the debtor. In the creditor files a breach-of-contract suit against the debtor and receives a civil judgment for damages, he has several options in how to attempt to collect the money. If the debtor will not voluntarily pay the money, the creditor---which can be both a private creditor or a government agency, such as the Department of Health and Human Services, which runs Medicare---may attempt to garnish the individual's wages.

When a creditor seeks garnishment, he is seeking to have a regular source of income for the borrower siphoned off to help pay off the debt that he owes. While garnishment is usually applied to wages from an employer, it can, in some places, be applied to other forms of income. When a person receives Social Security disability payments, he receives monthly checks that can, in some cases, be garnished.

Generally, payments made by the government to an individual, such as Social Security checks, are not eligible to be garnished by private creditors. Even after these payments have been deposited into a bank account, the creditor cannot seize the money. However, this rule does not apply to government agencies. The Department of Health and Human Services could, theoretically, seek the garnishment of a debtor's wage by serving a garnishment order on the Social Security Administration.

Medicare is a government program that provides health coverage. Although Medicare is low cost, it is possible to run up a debt to the Department of Health and Human Services, such as through co-pays and premiums. If a person owes money to the government agency and fails to pay, the government may pursue payment in the manner of a private creditor, including through garnishment.

In addition, it a person is sued by the U.S. government for an issue related to Medicare---such as after committing Medicare-related fraud---and damages are assessed against him, the government may attempt to seize his Social Security benefits to pay off the money he owes. However, the judge will likely set limits on what percentage of the benefits the government is allowed to garnish and the garnishment may be subject to state laws as well that can further restrict the garnishment.

Pros and Cons of Credit Card Consolidation

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Credit card debt consolidation can be very tempting for people feeling overwhelmed by credit card debt. There are several credit card consolidation options to consider, each with their pros and cons.

You can consolidate with a home equity loan, also known as a second mortgage, or a home equity line of credit, a revolving credit account in which your home serves as security for the debt. Debt consolidation loans provide one lump sum intended to pay off all your debts. Getting such such a loan will often require your home as security on the loan.

A debt consolidation company offers to negotiate with your creditors to help settle your debt and pay it off through one monthly payment. A debt management program (DMP) is a structured program which administers paying off all your credit cards through low monthly payments. There is not usually any debt settlement, though fees and penalties can be negotiated.

The main benefits of credit card consolidation are that you are making one single monthly payment to one creditor. The payments will usually be reduced, and if you get a good negotiated settlement, you could pay up to 60 less than what you would individually on the balances you owe. Collection agencies will no longer be able to harass you, but will be referred to the consolidation company or DMP.

The loan and line of credit options can cover not only credit card debt, but medical bills, and help you get on track with any mortgage arrears. A consolidation loan and DMP should also be able to help with this.

A consolidation loan tends to give more favorable terms than a regular bank loan and credit cards, so you might end up with a lower interest rate overall on what you owe. With a home equity loan, you might be able to negotiate a lower interest rate, and can benefit from the tax deductions from paying mortgage interest rather than non-deductible interest.

Credit card consolidation should not be undertaken without a lot of thought. The main disadvantage is that if you choose a home equity loan or line of credit, you could risk losing your home. In the case of a consolidation loan, the lender would also require your house to be used as security for the loan.

If you are not a homeowner, then with so much debt and a poor credit rating, you actually might end up paying a higher interest loan. Once you apply for debt consolidation, the lender will discover your full financial predicament. The lender might decide that you are carrying too much debt, and leave you with little alternative but to pay high interest to them, or declare bankruptcy.

Be sure to run the numbers carefully. The monthly payments and interest rate might appear lower in the short term, but you might end up with a longer-term loan, which will mean paying more in the end. Also beware of the fine print, including hidden charges or fees, or early repayment penalties.

Many credit card consolidators claim that your credit rating will not be affected by consolidation. But unless you are paying all the cards off in full via a loan, any negotiated settlement you make will appear on your credit report. Your account will usually be frozen as well, therefore sacrificing the little credit you might have left.

Not all debt consolidation services or DMPs are trustworthy and reliable, the Federal Reserve Board warns. Such companies also may not be able to do all they claim they will do. If they pay your credit cards late, you might end up in even more trouble, paying more in penalties, or even being considered in breach of the agreement and liable for the full outstanding balance.

Can Debt Collectors Garnish Your Bank Account if You Have SSDI Income Only?

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Once debt collectors have made multiple attempts to contact you about a debt, their next step is often filing a lawsuit against you. If the collectors win the lawsuit and obtain a judgment against you, the court can issue an order for wages to be garnished or bank accounts to be levied or garnished to recoup the amount owed to the creditor. (Frequently, the term "levy" is used when a creditor seizes funds from a bank account, and "garnish" is used when it seizes a debtor's wages withheld by his employer.) Legally, Social Security Disability Income (SSDI) is protected from garnishment. Unfortunately, the burden of proving that an account is composed of Social Security funds falls on the SSDI recipient.

Social Security retirement payments and SSDI are both protected from garnishment under Section 207 of the Social Security Act. The Social Security Administration will actively protect your funds until you receive them. From that point, your funds are still protected, but Social Security won't actively intervene if your bank account is garnished (levied) incorrectly. Section 207 protects funds that are identifiable as Social Security, so if your SSDI payment is deposited into an account that also has deposits from other sources (family or work, for example), the SSDI payment is no longer easily identifiable.

In general, government agencies can garnish a limited amount of your SSDI or other Social Security income from your bank account. The Internal Revenue Service can garnish wages or levy accounts for back taxes, for example. Child support enforcement can also garnish your SSDI or retirement benefit. Civil penalties can also be garnished or levied. These garnishments all take place at the Social Security level, so they're completed well before your money reaches your bank account.

Even though your SSDI or Social Security retirement benefit aren't supposed to be garnished (levied), the reality is that banks often allow the garnishment. Banks, especially large ones, receive thousands of garnishment requests, so they may not fully investigate each one. You, as the SSDI or retirement benefit recipient, need to contact the court and your local sheriff to contest the garnishment, citing Section 207 of the Social Security Act. You may need to complete paperwork and submit documentation of your benefits to the court, the sheriff and your bank.

If you're on SSDI or Social Security retirement and have been sued for a debt, you should consider transitioning your SSDI benefits to Social Security's Direct Express debit card, rather than using a bank account. You can use the debit card to make purchases, and you can also withdraw cash. This can make paying bills more difficult, as you would need to purchase money orders or cashier's checks rather than writing a check. Another option is hiring a lawyer. Not only can a lawyer handle the paperwork, but your lawyer may have a relationship with a bank where you can deposit your SSDI benefit money without any danger of a garnishment. The lawyer guarantees the bank that your account is exempt from garnishment. A lawyer may be a bit expensive, but the account protection may be worth the investment.

Credit Card Validation Rules

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Most credit-card validation systems are run by a Mod 10 algorithm. This algorithm can be modified to filter various validation rules or requirements. Although there are several rules that can be applied to the validation of credit cards, most companies will choose certain ones based on preference and security needs.

The first two to six digits of a credit card determine who the credit provider is. For example, Master Card begins with the numbers 51-55, American Express begins with 34 or 37 and Discover begins with 6011. Master Card and Discover each have 16 numbers while American Express has a total of 15 digits. Being able to compare the number of digits to the beginning codes provides one more layer of protection for provider verification.

For every credit-card number, there is an expiration date. This is the most common qualifier for credit card validation. If the expiration date is expired or does not match the information held by the credit card provider, the card will be rejected or declined.

Being able to validate the address or zip code connected to the credit card is often required as information that is not available on the card. This is personal information that someone who is not authorized on the card will probably not have. It is not on the card so it is external information that has to be acquired or possessed.

With today's technology, it is becoming easier and easier to acquire credit-card numbers. Card security codes are much more difficult to obtain with the credit information. Card security codes are 3 digits on the back of the card that come at the end of the card number. Companies that require this as a verification rule do so to confirm that the credit card is in the physical hands of the user.

The signature on the back of a credit card was once a main rule of validation. Signatures were compared to other forms of identification to verify the user. This was critical before credit card machines were electronic. When credit card transactions were all manual, this was the only means to assure the vendor that the person was authorized to use the card. Cards can still be declined if the signature does not match the driver's license or identification card.

Laws on Debt & Loans

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The average American has over $10,000 in personal debt, according to a February 2011 article on the Money Talks News website by Karla Bowsher. The highest levels of debt were found in the Northeast. If you are in debt and it is spiraling out of control, you have doubtless wondered what the laws on debt and loans are. Familiarizing yourself with these laws will give you firm legal ground to stand on in the event that you need to fight.

Your debt is subject to a statute of limitations. This means that your creditors have a certain amount of time to collect your debt. After the clock runs out on this, the creditor can attempt to bring you to court, but you can use the statute of limitations as an affirmative defense. The state of limitations varies from one state to another, so check into the laws where you live. Remember that the statute of limitations running out does not prevent your creditors from sending letters, calling your home or using other legal means to collect the debt.

Federal law prohibits a number of practices by creditors under the Fair Debt Collection Practices Act. Creditors cannot harass you by using foul language, threats of violence or repeated phone calls. They are prohibited from making any false statements to you or anyone else regarding your debt. The law prohibits creditors from sending you postcards or any correspondence designed to look like it comes from a court when it does not. You may be eligible to receive damages in civil court if the law is violated.

There are several laws that pertain to mortgages. The Truth in Lending Act sets forth requirements for written disclosure regarding areas like finance charges, APR and your total payment, including interest. The Equal Credit Opportunity Act makes it illegal for you to be refused a home loan on the basis of race, gender, national origin, religion, marital status or age. The Real Estate Settlement Procedures Act requires disclosure from lenders to consumers for mortgages, home repair loans and home equity lines of credit.

The Fair Credit Reporting Act describes a number of rights consumers have under the law regarding their credit report. You must be informed any time that your credit report is used to deny you credit or a loan. This includes the right to know which credit agency's report was used. You have the right to look at your credit file, including one free credit report per year. The law provides a method for resolving disputes that you may have regarding what information is in your credit file.

If You Own a House and Are Paying on It, Can You Claim a Bankruptcy?

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Filing for bankruptcy while owning a house and making payments is common. Although bankruptcy is often used to stop foreclosure, some people file for other reasons. They may never have missed a payment on their mortgage, but are months behind on excessive credit card debt and other loans. Filing for bankruptcy allows them to reorganize their finances and end harassment from debt collectors while keeping their homes.

Bankruptcy exemptions allow you to protect certain assets during bankruptcy, including your home. The University of Maryland University College reports that one popular form of bankruptcy, Chapter 13, allows you to keep all of your property, including real estate. Your personal residence and homes you own as rental property can be protected through Chapter 13. It is also possible to use an exemption to keep a primary residence during Chapter 7 bankruptcy. Bankruptcy exemptions vary by the state, with dollar limits placed on how much you can exempt. Chapter 7 is typically used to liquidate assets to pay creditors, although a primary residence can be protected.

Bankruptcy is designed to be tough but fair while paving the way for eliminating debt and eventually rehabilitating your credit. Chapter 7 can be completed in only a few months, with unsecured debt such as credit cards completely eliminated. People filing for Chapter 13 must complete a payment plan lasting three to five years. All unsecured debt remaining after the payment plan ends is eliminated.

People who have been paying their mortgage should expect to continue doing so in bankruptcy. A homeowner who has fallen behind on her mortgages can use bankruptcy to live free for several months but eventually will lose the property to foreclosure if she do not make arrangements with her lender to bring the account current.

People whose mortgages are always paid on time should seek alternative assistance for credit problems before choosing bankruptcy. Not missing mortgage payments means you have your most important asset -- shelter -- under control. That allows you to seek alternatives for resolving debt related to credit cards and other loans. For example, allowing your car to be repossessed and negotiating any remaining balance is a solution for automobile debt you cannot afford. The repossession will hurt your credit rating, but not as much as a bankruptcy. Credit card debts can also be negotiated, with settlements for less than the full balance possible. Contact lenders directly to discuss resolving debts through settlement.

Bankruptcy is listed on credit reports for at least 10 years, including the date of your filing and the date of the discharge or dismissal. In Chapter 13, the discharge can occur up to five years after the filing, meaning bankruptcy information will be listed on your credit report for up to 15 years. Other negative credit information, such as settlements and auto repossession, are listed for seven years.

Can You Erase Bad Credit Information?

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Credit is one of the most important things in a person's financial life. It can determine whether you can purchase a home, rent an apartment, buy a new car, get a student loan and can even be used as a reason why you are rejected for employment. When bad credit information is on a report, most people want to do everything they can to get rid of it as soon as possible.

The easiest information to erase is bad and incorrect personal information. This includes your name, date of birth, aliases, addresses and employment. If your name is spelled incorrectly or is just plain wrong or your date of birth, address or current employer is incorrect, contact the credit bureau and inform it of the mistake either by mail, phone or on an online dispute form. You may be required to submit proof of the valid information: a copy of your Social Security card with your name and number, legal name change paperwork, a copy of your birth certificate, a letter or pay stub from your employer and a copy of a lease or mortgage.

It is frustrating to be a victim of identity theft or to see that a bank has made a mistake and listed an account that is not yours on your credit reports. If these accounts haven't been paid on time or are over the credit limit, they could be bringing your credit score down. But there are ways of erasing this information.

If you find any of these types of accounts on your credit report, contact the creditor listed directly or the credit bureau and file a dispute. If you were a victim of identity theft, they may require you send or fax a copy of the police report or court papers, if you filed criminal or civil charges. Once the creditor or credit bureau verifies that this was not your account, it will be erased. Do not make false claims about your accounts because that is against the law.

Bad credit information on an account that used to be yours can remain on your reports for seven years from the date of last activity. You have a couple options for getting that information erased. First, if you had a charged off account that went to a collection agency and you are willing to pay the debt off, send the collection agency a pay for delete letter. This letter in effect states that in exchange for paying the debt off, the agency will delete the account from your credit report.

Second, if you have had a history of late payments with a particular creditor but your recent history with the creditor shows you are paying on time, send a goodwill letter. It will ask for the creditor to consider re-aging your account so that your credit report no longer shows those late payments. Re-aging willl erase that bad information, and no longer show late payments. Stress in your letter that your late payments were in the past and that you have been a good customer since then.

Finally, if you were an authorized user on somebody else's credit account, request that your name be removed from the account and that the account be removed from your reports. The creditor will erase this information because you are not legally liable for someone else's debt.

Can You Be Sued If You Are Paying on Debt?

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Since debt arises as a result of a legally binding contract between a creditor and a debtor, failure by the debtor to pay according to the terms of the agreement would constitute a breach of contract. For most consumer credit transactions such as a credit card agreement or an installment car loan, the terms and conditions of the contract are clearly specified within the agreement including repayment terms and the incidents that will give rise to a default or breach of the contract.

If a debtor were making payments on the debit balance owed in accordance with the terms and conditions of the repayment agreement, the creditor would have no reason to file suit against the debtor and no legal case even if he were to do so. If, however, the debtor is making payments, but the amount of the monthly payment is below the minimum monthly amount required by the repayment agreement, the creditor would be within his rights to sue the debtor for breach of contract.

A debtor who diligently makes payments under the terms of a new repayment arrangement executed with the creditor and is later sued by the creditor for breach under the terms of the original contract might have a good faith defense to the action.

Novation is a legal concept that holds that if a creditor and debtor agree to new repayment terms they have in essence entered into a new contract the terms of which supersede those of the original contract. Whether the debtor would prevail on his legal argument would depend on the nature of the new payment agreement, whether it was oral or in writing and whether or not the creditor explicitly waived his rights to sue for breach of contract under the terms of the original contract.

Though the decision to file suit would depend on the facts, circumstances and financial condition of each debtor, as a practical matter, most creditors would be reluctant to institute legal proceedings against a financially destitute debtor who is making a good faith effort to make some kind of payment--however modest--toward his debit balance. Even if the amount of the payments remitted by the debtor is below the required minimum monthly installment amount, unless the creditor has reason to believe that it would be able to secure additional sums from the debtor after obtaining a judgment, incurring court costs and attorney's fees would be wasteful.

Is a Wife Responsible for a Husband's Debt in Pennsylvania?

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Debt within a marriage can be a divisive subject. If the spouses have different attitudes toward money -- perhaps one's a saver and the other a spender -- this can lead to arguments and sometimes even divorce. It's helpful to be aware of the debts for which you are responsible within a marriage.

Pennsylvania is a common law state, rather than a community property state. This means that in many instances, each spouse is responsible for his own debt, unless the debt was used to purchase items that benefit the general household. An "innocent" spouse has more protections in a common law state against being held liable for her partner's debt.

If your husband had significant debts at the time he married you, in Pennsylvania these are considered his and his alone. He is responsible for paying them off, and you cannot legally be pursued by any of these creditors. In this context, you should be wary of refinancing pre-marriage debts. If your husband completes a refinancing of his prior debt, there's an increased chance it will be considered debt acquired during the marriage, in which case you could be held liable.

If your husband accumulated debt to buy items or services that could be considered of benefit to the entire household -- for instance, groceries or medical care for a child -- you can be considered responsible for that debt in Pennsylvania, even if you did not cosign for it. If the purchases made benefit him alone, such as a vacation he takes by himself, you cannot be pursued for the debt as long as you did not cosign for it.

If you have joint credit card accounts with your husband, and he runs up hefty balances, you are considered to be equally responsible for this debt, because your name is also on the account. It does not matter whether you knew about the spending or whether it benefited you. By signing onto the account, you have given your consent that you are equally liable for all charges made.

Will Credit Card Companies Settle Debt With Someone Who Has Business Assets?

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Generally, credit card companies will settle a debt with someone who has business assets -- unless the credit card is a business credit card with the company's assets pledged as collateral. Under that scenario the card company may decide that it has more to gain by seizing some of the business assets than settling the account for less than the full amount owed.

Settlement offers are not guaranteed, no matter what the circumstances. The card companies are not required by law to accept a settlement, and a decision to grant a settlement offer may be made only after the bank reviews your personal credit to analyze your financial situation. Credit card agreements give banks the right to check your credit, and a settlement offer could be likely if a review shows that you are clearly suffering from serious debt problems.

No collateral is held for unsecured credit cards, except for your signature and promise to pay. It all depends on the structure of your business, but generally a card company has no leverage to consider your business assets if you are defaulting on a personal credit card. For example, if your business is formed as a limited liability company, the bank cannot legally seize the business assets for your personal credit card debt. With that option removed, the bank may not consider refusing a settlement offer based on your business assets. The limited liability company structure separates business and personal finances and debts.

When making settlement decisions on unsecured credit cards, banks generally consider only your payment history, the current status of your account and information you provide about your financial situation. This means your business assets may never even come into play as you ask for a settlement.

You should keep quiet about your business assets when discussing a settlement of your personal credit card. The business assets belong to the business and you are responsible for your personal accounts. The SmartMoney website reports that some banks will settle delinquent, unsecured credit card accounts for 20 to 75 percent of the balance.

The important thing is to get the delinquent debt behind you, even if that means accepting less of a discount than you had hoped for. Some credit card companies will file lawsuits to collect delinquent debt, and that is something that you should avoid. A lawsuit could result in additional costs because of attorney fees and even a garnishment of your bank account if you refuse to pay. Sometimes paying the full amount due is a wise move just to put the issue to rest.

Tips on Credit Card Collections

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Seeing that same phone number on your caller ID several times a day or a week, and knowing it's a credit card collection company, can be intimidating. Don't be a victim of the collection attempts. Instead, be prepared to negotiate with the credit card companies. Get your information together and call them back, on your terms, when you are armed with the information you need to negotiate your best agreement.

When negotiating with a credit card collection company, know your finances. Have a list of expenses that you must pay every month such as rent, utilities, food costs and transportation in front of you. Total these expenses and compare it with the income you produce on a monthly basis. When negotiating a payment agreement with a credit card company, do not agree to anything that would result in the payment plus your list of monthly expenses exceeding your monthly income.

Send your payments on your own schedule. Do not give the creditor access to your financial accounts. According to debtxs.com, once you have sent a creditor a post-dated check, that creditor can attempt to cash it. The same situation applies once you have supplied banking information such as your routing number and account number. Don't make it easy for the creditor. Even if you agree to a payment plan, keep control of when you send that payment in your hands. If they have your account information and agreed-upon schedule, the creditor now has control over that payment instead of you.

Once you have agreed to set up a payment plan, do not finalize it until you discuss your credit report. As part of your negotiations, if you agree to a debt settlement plan for paying less than the full amount, request that the creditor note on your report that the debt is paid in full. This will avoid the damage to your credit report that a note that you settled for less than the full amount can cause. Also request that the credit card company remove any previous negative reports on your credit. Make this a part of your agreement. It's not guaranteed that the company will agree to this, but it won't happen if you don't ask.

Don't assume that the agreement on the phone is final. Get it in writing. This way, if the credit card company fails to follow the agreement, you will have a written copy for any legal action you take. If you act on the phone call without documentation, the credit card company can deny the conversation occurred.

Solutions for Cleaning Up Debt

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Debt is the cause of worry and anxiety for a large number of Americans. Like most problems related to finances, it can create tension between couples and make for an unpleasant home life. However, knowledgeable financial advisers have developed easy-to-follow plans to help people clean up and eliminate their debt.

Financial counselor Dave Ramsey dispels the myth that the debt carrying the highest interest rate should be paid off first to quickly eliminate debt. Instead, Ramsey suggests that the smallest debt be paid off first to build momentum in what he calls on his website a "debt snowball." Ramsey says "personal finance is 20 percent head knowledge and 80 percent behavior...When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction."

Ramsey's advice is to accumulate $1,000 in a cash savings account in case of unexpected costs and then to list in order all debts, with the exception of a mortgage, from smallest to largest. Pay off as much as possible of the smallest debt each month, while only making minimum payments on all other debts. When that first debt is paid off, begin making larger payments on the next smallest debt until all debt is eliminated.

Suze Orman, another well-known financial adviser, suggests more radical solutions for cleaning up credit card debt. Orman suggests on her website that the first thing you must do is cut up all credit cards. Save one emergency card that should not be carried in a wallet. Then, make payments each month that are as large as you can afford. Orman suggests negotiating the best credit card interest rates, even if that means switching credit cards a few times a year until all of the credit card debt has been paid off.

If you lack willpower or feel overwhelmed, Orman advises calling a nonprofit agency, such as the Consumer Credit Counseling Service, which can help with the organization and consolidation of debt.

Many people are attracted to debt consolidation when they feel overwhelmed by their debt, but Ramsey advises against such a service. He explains on his website that "debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However...we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, but if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business."

Instead of staying in debt longer, Ramsey advises people to change their habits regarding personal finance---namely, to get a part time job to pay off debt as quickly as possible, and then live on less than they make and save for big purchases, such as an automobile, over time instead of putting the purchase on a credit card or taking out a loan.

The Georgia Garnishment Statute

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If you are a Georgia resident who has fallen behind on credit card, installment loan or other debt payments, your creditor will typically make phone calls and send letters in an attempt to compel you to catch up on your payments. If you do not respond or if you demonstrate unwillingness to bring your account current, Georgia law permits creditors to garnish your earnings and bank account balances.

Title 18, Chapter 4 of the Georgia Annotated Code authorizes garnishment of wages and bank accounts in Georgia. These articles also establish the procedures creditors must follow to legally garnish your wages or bank account.

Before a creditor can garnish your wages or funds, it must first obtain a legal judgment against you for the debt you owe. The creditor files a civil suit, typically with the magistrate court in the county where you live. The court notifies you of the lawsuit and gives you 30 days to respond. If you do not respond or provide a valid defense, such as proof that you have paid the debt, the court will typically award a default judgment to the creditor.

Georgia law follows federal limitations on how much a creditor can garnish from your wages, and the types of income that are exempt from garnishment. A creditor cannot garnish disability benefits, Social Security income, child support income and most insurance benefits. A creditor may only garnish 25 percent of your disposable income, which is the portion of your earnings after statutory deductions such as federal and state taxes. If you earn less than 30 times the federal hourly minimum wage each week, your income is exempt from garnishment.

Georgia law does not place specific limitations on amounts a creditor may garnish from your bank account, except that it may not garnish more than the total amount you owe, plus court costs and interest of up to 12 percent per year. However, Georgia law provides an exemption for $400 of personal property, including cash.

How to Calculate Payoff and Debt Reduction

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If you have a debt, the payoff as well as debt reduction can be calculated if you have all of the terms and conditions of the loan. The number of days in the billing cycle or the number of days between payments will help with your calculations. Each day your debt is outstanding, interest will accrue. When you pay off a debt before the loan term, you save money in finance charges.

Instructions

Gather all of the terms and conditions of your loan. The interest rate and balance will be needed to calculate debt reduction and/or a payoff on your loan. The higher the interest rate, the more you accrue in finance charges day to day. If you have a six-year loan in the amount of $15,000 with an interest rate of 8 percent and monthly payments of $263, you can calculate debt reduction.

Calculate debt reduction. If you sign papers for a loan on July 1 and your first payment is due on Aug. 1, and it's paid on Aug. 1, your debt reduction will be $163.01. Using the example, take the .08 interest rate, or 8 percent of $15,000, which is $1,200. Divide that by 360. These calculations always assume each month has 30 days for simplicity. That gives you $3.33. Then multiply the result times 30 days -- the number of days in the billing cycle. That gives you the amount of interest paid, which is $99.99. Subtract the interest from the payment to get debt reduction -- $263 $99.99 = $163.01. The new balance is $14,836.99.

Perform the payoff calculation. You can determine how much is needed to pay off the entire balance using the number of days between payments instead of the 30 days in the billing cycle. For example, if you decide to pay off your loan on Aug. 20, the following calculation will help you find the payoff. Apply the 8 percent interest rate to $14,836.99 and multiply that number by .08. Divide that by 360 days. Then multiply by 19, the number of days from the last payment until the payoff date.

Find the payoff figure. Your interest from the previous calculation is $62.65. Add the amount of your interest to the outstanding balance of $14,836.99 to get the payoff of $14,899.64. If you are mailing your payment on Aug. 20, add three or four days of additional interest to account for mail time. Take $62.65 and divide it by 19 to find that interest is accruing daily at a rate of $3.30 based on the balance of $14,836.99. Therefore, four days of interest will be $13.20. This amount should be added to your payoff.

How to Reduce or Eliminate Debt

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Debt sometimes feels like a merry-go-round, where you move circles without going anywhere. If you charge as much or more than you pay on your debts each month, those debts can ruin your financial future. Resolve to start getting rid of those debts. Change the habits that got you intro trouble and learn how to pay your debts off faster. Then you can watch your debts shrink every month and eventually eliminate them completely.

Instructions

Start by eliminating nonessential expenses. If you consider cable TV, cell phones, meals out and new clothing essential, you need to reconsider. Ric Edelman, author of "The Truth About Money," says that very few expenses are essential. You can eliminate your gym membership, entertainment and processed foods, he says. You can decide for yourself how far to go, but at least consider eliminating some of these regular expenses. For more ideas on living frugally, try some of the many tips in Amy Dacyczyn's book, "The Complete Tightwad Gazette."

Make a list of what your owe, including the names of the creditors, interest rates and amounts. Resolve to pay off the highest interest rate loan first and pay the minimum on all the others, as Kiplinger suggests.

Try to transfer your highest interest rate loan to get a lower rate. Usually, the highest rate is on a credit card. Kiplinger suggests obtaining a lower-rate card and transferring your balance. If the low rate is temporary, make certain you can pay the card in full before it runs out. You can also transfer balances to a lower-rate card you already have or call and ask your banks for lower rates on your present cards.

Stop borrowing immediately. Jane Bryant Quinn, the author of "Making the Most of Your Money Now," says this step forms the basis for getting out of debt. Otherwise, if you pay off bills and borrow at the same time, you are going in circles. If your basic expenses still exceed your income after making cutbacks, consider major changes. Downsize your home, as Edelman suggests, or get rid of a car.

Take money from savings to pay off your debts. Jane Bryant Quinn recommends that you leave your retirement accounts intact. Use this money for a one-time reduction of debt. Don't keep paying high interest on debt and collecting pennies on your savings.

Put your extra money on the highest interest rate bill every month, paying only the minimum on the others, as Quinn suggests. Do this with each highest rate bill in turn. If you stay on a cash basis and live frugally, you will reduce your debts every month. In time, your new habits will help you pay off your debt completely. Then you will be ready to invest for a brighter future.

What Happens When You Don't Pay Credit Cards in Ohio?

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Defaulting on credit card debt in Ohio may result in late fees, higher interest rates, lower credit report scores and lawsuits. Additionally, over-the-limit charges may apply if your credit card is at or near the limit when a late payment fee hits. Reduce penalties by notifying creditors and explaining the situation before you miss a payment.

Generally, if you are 30 days late in Ohio or stop paying altogether, the account goes to collections. Debt collectors can call at home or work and contact your friends and family in an attempt to find you. However, debt collectors cannot call you before 8 a.m. or after 9 p.m., talk to anyone else about your debt, lie to you, harass you or call you at work if you make it known that your employer prohibits collection calls. Stop debt collectors from contacting you by telling them in writing that you no longer wish to be contacted about the debt.

Creditors can sue you for not paying your credit card debt. In Ohio, you have 28 days to answer a lawsuit after receiving a summons. Failure to reply to a lawsuit within the set time frame results in forfeiture of the case. Claiming the debt is invalid is a legitimate defense. If a debt is beyond the Ohio statute of limitations for credit card debt---as of February 2011, six years from the date of last action on the account---creditors cannot sue you to collect.

With wage garnishment, your employer may withhold up to 25 percent of your paycheck to settle a debt. Bank levies involve using any funds over the first $400 in an account to pay creditors. Social Security and disability benefits, some retirement accounts, unemployment funds and most other types of federal or state benefits are exempt from garnishment. Contact the issuing court, your bank and the creditor to claim a garnishment exemption.

Delinquent credit card information will end up on your credit report. Default payments lower your credit score, resulting in higher interest rates from other lenders and hindering future credit options. Negative information remains on the report for up to seven years after the initial reporting. Paying the debt or closing the account does not erase accurate negative information.

Information on Alternative Credit

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People who do not have a traditional credit score -- there are 50 million of them, according to the Fair Isaac Corporation -- sometimes wonder how to get a loan if obtaining one requires a credit history. As long as you pay bills each month you can probably acquire the standard lines of credit, such as a mortgage and credit card, but it may prove a little tougher than normal.

An alternative credit score is a risk model that factors in payment data not normally used by the major credit bureaus. This can include any type of creditable account, such as utilities and rent. Unlike with normal credit accounts and loan, the creditors of nontraditional payments usually do not report payment data to the bureaus, so the consumer must pay a third party to verify payment data and make the reports viewable to future lenders.

Some people prefer to use cash only or loans so sparingly that the credit bureaus cannot give them a reliable score. If those without a credit history want a loan, they are usually out of luck when going by the standard credit rating model. By using alternative means to prove creditworthiness, banks can open up the credit market to a large, potentially lucrative sector of the market, such as minorities, young adults and women, according to USA Today.

Lenders do not have to accept an alternative credit score and many take the wait and see approach until the credit industry has a firmer grasp on the legitimacy of alternative scores. Fannie Mae and Freddie Mac -- two the of largest mortgage providers in the U.S. -- do not accept these scores as of 2009. The use of alternative scores is gaining steam, and most of the larger credit bureaus and credit scoring companies, such as the Fair Isaac Corporation, have algorithms for alternative scores.

You can prove your own creditworthiness without a formal scoring system by presenting evidence that you pay bills voluntarily. Before credit scores took off in the 1970s and 1980s, lenders often used informal judgments on credit decisions. The Federal Housing Administration, for example, will consider canceled checks for services and written statements from creditors detailing your account history.

The Statute of Limitations on Debt Collection in New Jersey

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As of March 2010, numbers released by the Federal Reserve indicated that the amount of outstanding consumer debt was approximately $2.5 trillion, which only reflected consumer debt not secured by real property, including $856 billion in credit card debt. At the same time, Fitch Ratings estimated the number of credit card defaults to be at 13 percent. In New Jersey, the statute of limitations determines how far a debt collector can go to compel payment on a delinquent debt.

Anyone with a credit card should be aware of the last date a payment was made on their account. Many credit card holders who have fallen behind on their payments are not sure what to do when creditors come calling. The date of last activity (also known as the date of first delinquency) determines when the clock starts ticking on your statute of limitations. The statute of limitations is the window during which a creditor can sue you for nonpayment of a debt. In New Jersey, the statute of limitations is six years for promissory notes, written contracts, oral contracts and open accounts, which is the category that credit card debt falls into.

A debt outside the statute of limitations is known as a "time-barred debt." After the statute of limitations window closes, a debt collector no longer has the right to sue you. You still owe the debt, but you cannot be compelled by a court to pay this debt back once the statute of limitations has passed. If a debt collector attempts to sue on a time-barred debt, it is important that you show up to court and let the judge know that the debt is outside of the statute of limitations. Be aware that a debt collector can still attempt to collect on a debt outside of the statute of limitations, but he cannot threaten to sue you to collect.

A common practice in the collections industry is debt re-aging. Re-aging happens when you take action on an old account that causes the date of last activity to change and start the statute of limitations all over again. Actions such as making a payment or even just acknowledging an old debt can cause it to re-age. Consumer advocates recommend that you do not acknowledge old debts so that you do not accidentally re-age your debt.

The statute of limitations is not the same as how long a debt remains on your credit report. Bad debts can be outside the statute of limitations and appear on your credit report. In most cases, a delinquent debt will remain on your credit report for up to seven years after the date of last payment.

The Fair Debt Collections Practices Act (FDCPA) of 1977 is a federal consumer law that spells out the rights of consumers when it comes to dealing with debt collectors. It also details what collectors can and can't do when they are attempting to collect on a delinquent debt. It is in your best interest, as a consumer, to become familiar with your rights under the FDCPA if you have any outstanding delinquent debts .

Is it Really Cheaper to Consolidate Debt?

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Consolidating debt refers to eliminating a number of smaller debts by replacing them with a larger debt. This type of consolidation offers one primary benefit: simplicity. It can be much easier for a borrower mired in debt to deal with one monthly payment instead of many different payments from various loans and credit cards. However, debt consolidation does not always save money. Savings depend on the terms of the loan.

Many people believe that if they consolidate debt into a new loan with a lower interest rate, they will be paying less. This is not necessarily true. A new loan often starts a payment term over entirely. For instance, a refinance will replace an old mortgage with a new mortgage. The new loan may have a lower interest rate that creates a lower monthly payment, but it will also restart the 30-year term of the loan. This lengthens the amount of time the borrower has to pay the debt and may lead to even greater expensive by the time the loan is finished.

Debt consolidation is cheaper when the rate of the new loan is less that the rate of the old debt and the term is less or similar to the term of the old debt. Since consolidation often applies to several different debts, borrowers must calculate all the rates together, along with different terms, to discover if they will actually save money using the new rate of a larger loan. Fortunately, large loans tends to have lower rates than small debt lines like those associated with credit cards.

Borrowers must also consider loan fees when considering consolidation. There are always new fees attached to the creation of a new loan, from origination and application fees to escrow fees if the new loan is a second mortgage. These fees can add up to thousands of dollars, an unrecoverable costs. Not only must borrowers have access to these funds, but they must compare the cost of the fees to the savings from the loan to make sure it is really cheaper.

Consolidation has a number of effects on credit, many negative. Some people only consider consolidation if they have already defaulted on loans in the past, but these defaults can drastically lower credit scores. Consolidation can improve scores if debts are getting out of hand and the borrower has not defaulted yet but wants a way to repay old debts and deal with a new loan, possibly with a more manageable payment despite the increased long-term cost.

Information & Rights for Debtor Accounts

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Federal and state laws dictate the rights for collecting and reporting information relating to debtor accounts. Original creditors, debt collection agencies, debt buyers and credit reporting agencies may each play a role in a debtor's account. Original creditors initiated the account, but they have the right to sell delinquent debt to a debt buyer or to turn the debtor account over to a debt collection agency. Credit reporting agencies compile information from all three sources to calculate a debtors' credit rating.

The FDCPA --- Fair Debt Collection and Practices Act --- is a federal guideline for collecting debtor accounts. The guidelines apply to third-party debt collection agencies and debt buyers, but not to original creditors. FDCPA guidelines dictate the acceptable methods for collecting debtor accounts. For example, debtors have the rights to request that a collector validate any collection claim, only contact debtors in writing and not contact debtors at work. In addition, collectors may only request the debtor's contact information when speaking to anyone other than the debtor, unless it is the debtor's legal representative.

Original creditors and third-party debt collectors have the right to report information relating to a debt to all three credit reporting agencies. The accounts will positively or negatively impact the debtor's credit rating, based on the specific information reported. For example, if a debtor stops paying a debt, the creditor may report the account as a delinquency, which is negative. Debtors who pay their accounts on time will see a positive impact on their credit rating. Debtors have the rights to request confirmation that the account listing is valid from the credit reporting agency. If the account information is not confirmed as accurate, the credit reporting agency must remove the listing from the debtor's record.

Creditors have the right to file a lawsuit for a judgment against debtors with delinquent accounts. If the court awards a judgment against the debtor, it becomes a part of the debtor's public record and will remain as part of the credit report for at least seven years. Individual states dictate how long the judgment remains valid and some states give creditors the right to renew judgments. Credit reporting agencies have the right to report judgments as long as they are valid.

Debtors with delinquent accounts should be aware of their state's statute of limitation regarding specific debtor accounts. The statute of limitations defines the window of opportunity for debt collection. For example, creditors issuing accounts to debtors in Michigan have six years to collect the debt, but the same creditors issuing accounts to debtors in Mississippi have only three years to collect the debt. The statute of limitations varies based on the type of debt --- open accounts, oral contracts, promissory notes or written contracts. The statute of limitation time clock starts on the date of the last activity on the account. Each time a payment is made on the account, the clock begins anew.

How to Extend Credit to Tier One Customers

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Tier one credit borrowers are those who have FICO score above 720. A FICO score is a three-digit number between 300 and 850 that represents a borrower's overall creditworthiness. FICO stands for Fair Isaac Credit Company and was founded by Bill Fair and Earl Isaac. The FICO score is the universally-accepted score for extending credit. Extending credit to top-tier borrowers is relatively easy.

Instructions

Pull a current copy of the borrower's credit report to confirm top-tier status. See Resources for a free resource for pulling credit reports. However, if you are a loan officer at a lending institution, there will be an internal source in the lending software for pulling reports. You must gain the customer's authorization before pulling a credit report.

Check the borrower's credit report. If the customer does not have a FICO above 720, he is not a top-tier borrower. However, other factors will affect top-tier status. For example, a borrower could have 730 FICO score but also have a history of mortgage delinquency or credit card delinquency. This borrower similarly will not be qualified for top-tier credit.

Review credit options with a top-tier borrower. In most cases, these programs will offer the most competitive interest rates and fees. Note that these borrowers will have several lender options from which to choose. You must present a favorable and advantageous program to gain the customer's business.

Collect the documents in the "Things You'll Need" section. Send the borrower's application and documents to your company's underwriting department. These professionals will carefully scrutinize the loan application.

Review the final loan terms if anything changed after underwriting approved the loan. Some hiccups might include: a reduced loan amount or raised fees. These changes often occur if a borrower's income is not sufficient to carry a full loan amount.

Close the loan with the borrower. If it is an unsecured personal loan, you as a loan officer should be able to handle the closing on your own. If it is a secured loan--such as a mortgage--you will need a notary public to witness the mortgage signing.

Using Credit Vs. Debit

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Credit cards and debit cards both have their advantages and disadvantages. To determine which one is best for you, you should consider your spending habits, budgeting goals, level of discipline and financial situation. Neither is likely to emerge as a clear-cut winner, and you may conclude you need to use a combination of the two.

Some people may prefer the restrictions of debit, because it limits the amount of money you can spend to what you have in your account. However, you may still pay money in overdraft fees, which can quickly add up, if you go over your available balance. Credit cards can be more forgiving when it comes to expenditure, especially because they offer a grace period, but those perks often come at a higher price. If you carry a balance on your credit card, you pay an interest rate, and the balance can balloon if it is not paid down sufficiently each month.

Credit cards generally offer more fraud protection than debit cards. With credit cards, your liability in the event of a fraud is capped at $50, and credit card companies often will not charge anything if you report the fraud immediately. Your liability can be up to $500 or more with a debit card, depending on how quickly you report the incident. Also, banks can take between 10 and 90 days (under special circumstances) to conclude their investigations, putting you at a financial standstill until your debit card account is credited with the stolen charges. With a credit card you can suspend unprocessed payments and avoid further financial hassles.

Credit cards offer better rewards, though you still have to be disciplined regarding when you use them. To make the most of your rewards program, you should try to pay your balance in full each month to avoid having the rewards benefits negated by interest payments.

Using credit can help you build your credit score, whereas using debit has no impact on your score. Payment history affects 35 percent of your credit score, which makes it the most significant factor. When you use your credit card and make the payments regularly, you help build this score. However, irresponsible use of your credit card could cause significant damage to your credit score. If you carry a balance on your card, it could lead you to pay more for your purchases, and it also increases your credit-utilization ratio, which is the percentage of your credit limit being used and hurts your credit score if it is high.

How to Make a Reduced Settlement Agreement for Credit Card Debt

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Making a reduced settlement agreement for credit card debt can help save you thousands and eliminate your debt quicker. Creditors aren't required to accept your request to forgive your outstanding debt and settle for less. But crafting a convincing and professional letter may work to your advantage, wherein your creditor may negotiate.

Instructions

Write a settlement letter to start the negotiating process. Creditors accept debt settlement letters via postal mail. Write your name as it appears on the account, date of your request and your account number.

State why you're writing the letter. Keep your letter brief. Provide a short summary of your financial troubles (unemployed, divorce, considering bankruptcy, illness that prevents working). Explain that you're unable to satisfy your debt in full due to hardship.

Express your desire to settle the credit card debt for less than what you owe (include a dollar amount in your letter). In return, ask the creditor to accept your settlement as full repayment, wherein they will not sell the debt to a collection agency or take legal action to collect the balance.

Request an acknowledgement to get the settlement in writing. Inform the credit card company that you will not send your last payment until you receive a signed letter stating that the company accepts the terms of your proposal.

How to Build Good Credit After a Poor Credit History

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Credit card and loan companies are not the only entities that care whether you have a good credit report. Landlords, insurance companies and even employers commonly use your credit report for the sole purpose of gauging whether you are responsible. Therefore, if you have a poor credit history, it is important to learn the steps to rebuild good credit.

Instructions

Earn the highest credit score possible. If you are late paying your bills, especially credit cards --- or have maxed out your cards --- this can earn you a poor credit history. The most dangerous mark to your credit report is a bankruptcy or foreclosure. These linger on your credit report for seven years.

Commit to changing your spending habits. This means paying past bills before going shopping and incurring new ones.

Commit to paying for your groceries and gas each month, never carrying a balance. Building such a record of reliable payments will help you build good credit. Simply set aside your grocery and gas money and pay it toward your credit cards within the same month you incurred the charges.

Make sure you never make the mistake of maxing out your credit cards or exceeding your credit limit. This will definitely earn you a poor credit history. This mistake will raise your interest rates and over-the-limit fees. It is said that you should always stay below 50 percent of your limit to avoid a poor credit history.

Pay at least $5 over the minimum payment, if money is tight. Paying more than the minimum due will definitely help you build good credit.

How to Stop Debt Harassment

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According to the Fair Debt Collections Practices Act, creditors are not allowed to harass nor threaten debtors. The law has specific guidelines that creditors and collection agencies must follow when contacting consumers. Congress recognized that although a consumer may owe a debt, collection of that debt must occur within certain established parameters. If a collection agency or creditor violates the FDCPA, consumers have the right to seek redress from the courts for damages in a civil lawsuit.

Instructions

Order a copy of your credit report. Congress enacted the Fair and Accurate Credit Transactions Act in 2003, which provides for one free credit report every year from Equifax, Experian and TransUnion through AnnualCreditReport.com. You can also order the report on the credit bureau's website, by phone or via mail.

Look over the report for accuracy. If there's a collection account or debt that you don't recognize as yours, dispute it with the credit bureau.

Send a Debt Validation letter to any creditor that is requesting payment from you. The Fair Debt Collections Practices Act requires any collector to prove that the debt belongs to you. If they're unable to validate the debt, they must cease contacting you until they're able to do so.

Know your rights. Under the FDCPA, collectors can only call you between the hours of 8 a.m. and 9 p.m. and must cease contacting you at work once you request them to do so. They are not allowed to threaten you in any manner.

Send a Cease and Desist letter to any creditor that violates the rules of the FDCPA. A C&D tells the creditor that you no longer wish to receive communications from them regarding this debt except to notify you of legal action (see Resources). Send it via certified mail, return receipt requested.

File civil suit against any creditor that continues to contact you after a C&D request. The FDCPA provides this relief for you, so make use of it if necessary. There are many attorneys who specialize in consumer credit rights that can give you guidance on this issue.

How to Discharge a Public Debt

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A government must borrow money to finance its operations. This money owed is called the public debt. The standard manner in which a government borrows money is by selling securities or government bonds. These are essentially promises of payment within a fixed duration of time and the invested money earns interest. These government bonds could be sold domestically or to foreign investors. A less sustainable way of borrowing money is through direct loans from international financial institutions. Thus, there are two broad categories of public debt: internal--owed to domestic lenders--and external--owed to foreign lenders. Besides unpaid securities and foreign loans, a nation's public debt can also include other liabilities owed by its government such as contracted goods and services that have yet to be paid. A nation's public debt is often presented as a percentage of its gross domestic product (GDP). This is done to provide one of many indicators of the national economic state. There are several ways that a government can discharge public debt, the form and manner usually dependent on political and economic conditions.

Instructions

Increase revenue through higher taxes. The government's main source of income is taxes. To be able to pay back the money it borrowed, government must increase its revenue. Thus, the most often used solution to public debt is to raise taxes. This naturally is not a popular remedy, but it is an inescapable fact that public debt ultimately rests on the shoulders of a nation's population. A milder resolution is to improve tax collection, which can be done by instituting more efficient mechanisms.

Create a new and more logical budget. A nation's budget deficit is the difference between its government's revenue and spending. The government deficit is not equal to the public debt, but an increase in the former logically results in an increase in the latter. Bad or poorly planned government spending and non-productive investments contribute much to an increase in the budget deficit. Curbing expenditures is certainly not enough. Policy and decision makers may need to reprioritize the budget. This may involve administrative and/or legislative reforms.

Privatize government programs that are not working effectively. A badly structured bureaucracy can often lead to weak management and performance of public services. This also provides a breeding ground for graft and corruption. Unfortunately governments often have this undesirable tendency to throw money at a problem in the hope that the situation will be resolved. This, of course, does nothing to improve the public debt. Sometimes the only way is to privatize some public service institutions. This could at least increase an institution's productivity while reducing government payroll.

Welcome to our website credit and debt managementr.

Monday, March 31, 2008

Number

Considerations

Prevention/Solution

Sunday, March 30, 2008

Instructions

Saturday, March 29, 2008

Instructions

Physical Health Problems

Mental Health Issues

Behavior Impact

Coping Strategies

Instructions

Friday, March 28, 2008

Wage Differential Claims

Eligibility

Employer Insurance Differentials

Nonparticipating Providers

Judgment Process

Exempt Income

Property

Exceptions

Wage Garnishment Basics

Amount of Garnishment

Government Benefits

Exceptions

Thursday, March 27, 2008

On-Time Payments

Debt Ratio

Delinquency

Default

The Purpose of Government Grants

Government Help for Consumers

Your Biggest Risk

Debt Consolidation Options

Garnishment

Exemptions

Medicare

Considerations

Credit Card Consolidation Pros

Credit Card Consolidation Cons: Do The Numbers Really Make Sense?

Credit Card Consolidation Cons: Long Term Consequences

Social Security Garnishment Law

Exceptions

Bank Account Garnishment

Ways to Prevent a Garnishment

Wednesday, March 26, 2008

Provider Recognition

Expiration Date

Address

Card Security Code

Signature

Statute of Limitations

Illegal Practices

Mortgage Law

Credit Report Laws

Exemptions

Fresh Start

Mortgage Payments

Alternatives to Bankruptcy

Credit Reports

Tuesday, March 25, 2008

Personal Information

Fraudulent Account

Valid Account

Breach of Contract

New Payment Terms

Novation

Considerations

Monday, March 24, 2008

Common Law State

Debt Brought to the Marriage

Joint Benefit

Joint Accounts

Sunday, March 23, 2008

No Guarantees

Unsecured Cards

Financial Situation

Negotiating a Settlement